Investors will be following the Federal Open Market Committee meeting and the Federal Reserve’s interest rate decision this week. The central bank is widely expected to keep interest rates unchanged at 4.5%.

In the first quarter of this year, US GDP contracted by 0.3%, driven by a surge in imports ahead of anticipated tariffs in April, along with a decline in consumer spending following layoffs implemented by Elon Musk’s Government Efficiency Management Department. This development could increase pressure on the Federal Reserve to cut interest rates sooner rather than later specifically from President Trump.

Federal Reserve Chairman Jerome Powell has emphasized the importance of evaluating the economic impact of tariffs before making any changes to current monetary policy. While the Personal Consumption Expenditures index (the Fed’s preferred measure of inflation) fell to 2.3% in March, any potential shift in interest rates is likely to be driven primarily by developments in the labour market.

Investors will be paying close attention to Chairman Powell’s press conference for guidance on future monetary policy, particularly regarding the number and timing of potential interest rate cuts.

Attention will turn to the Bank of England’s Monetary Policy Committee meeting, where a 25-basis point rate cut is expected, lowering the interest rate from 4.5% to 4.25%.

The YoY headline inflation in the UK declined from 3.0% in January to 2.6% in March, providing the MPC with room to continue its gradual policy easing. On the other hand, the YoY core inflation stood at 3.4% in March therefore, any further decline in inflation particularly from the services sector, could support additional rate cuts later this year.

Markets will also be watching the voting split among MPC members. A larger number of votes in favor of a cut would increase the likelihood of further easing in the upcoming meetings.

Economic Data Highlights (UAE time)

Monday, 5th of May  

• Bank holiday in China and the UK
• CHF inflation rates (April)
• USD- ISM Manufacturing and Non- Manufacturing PMI (April)

Tuesday, 6th of April 

• CNY- Services PMI (April)
• EUR- Manufacturing and Services PMI (April)

Wednesday, 7th of April 

• RBNZ’s governor Orr speech
• US Crude Oil Inventories
• US rete decision and the Fed Press Conference

Thursday, 8th of May 

• GBP- House Price Index (April)
• Bank of England rate decision
• Bank of England’s governor Bailey speech

Friday, 9th of May

• GBP- Industrial & Manufacturing Production (Mar)
• Fed William’s speech
• CAD- Unemployment rate (April)